I just got back from a visit in Germany and they do LPG conversion all over, because it lowers the cost of driving a car to at least a third (not by a third). Enthused I looked at the chance of doing same, using Prins’ technology that is available for a large range of cars and conversion costs around 2000EUR in Germany for a 6 cyl or 8 cyl car. LPG is  tax relieved (tax is what makes the price difference for fuels in Germany, not the actual fuel cost).

The economics are compelling: 1 MMBTU (and in the end we burn any fuel for BTU and nothing else) in Nat Gas goes bulk for $5, in gasoline or diesel for around $28 to $30, crude oil for $15, LPG $16, but get this: compressed Nat Gas $18 (in CA). The mere compressing of Nat Gas to 3600 psi increases the value by approx. 4.5X, conversely running a refinery and trucking the whole stuff only results in a markup on the energy price of 2x.

What we have is a near monopoly on CNG sales that allows the vendor to set a price that makes things economically barely attractive for the consumer, but very profitable given the captive audience, as CA’s CARB does not allow bi-fuel cars, and hence as CNG vehicle owner you are exposed to those prices set.

Further, the market seems to be dominated by the lone importer(s) of Prins LPG or CNG conversion, who charges $8,900 for a car conversion to CNG and $5,800 for an LPG conversion. Making the conversion further unattractive, compared to the $4,000 for CNG and $2,800 for CNG in Europe. Admittingly the conversion in Europe is mostly to LPG and here to CNG, which increases the cost by way of a need for a high-pressure CNG gas tank as opposed to a low pressure, low profile LPG tank.

To be fair I should not let the EPA of the hook either, as they require a certification on the individual car model, which runs you $15,000 to $50,000 per model and year. So that is presumably factored in the price of the install.

In sum the EPA and CARB make their political cut, and the CNG provider its margin, and the Prins importer its profit, what gets killed on the way is the feasibility (you may need to drive more than 40,000 miles per year) for the introduction of inherently attractive different fuel economics, that are renewable possible. CNG could be generated from biogas (alas the latter also having a rough time getting of the ground but with huge potential).

What should be is a competitive field of CNG providers that orient their price on the NG price and not on what the market can bear, a CARB & EPA that aggressively puts market forces to play to foster LPG and CNG adoption, an importer and distributor that would be allowed in all states to have conversions take place at qualified garages, and a capturing of LPG from refining processes so it would be available at near refinery locations in CA, TX, LA, NJ etc.

The mere margin between NG and liquid fuel would drive people to conversion like crazy until the arbitrage opportunity is absorbed. That not happening is the proof for an imperfect, hence manipulated, market.

And yes, LPG or CNG would be 25-50% lower on GHG emissions – just as an aside.

This entry was posted on Thursday, August 25th, 2011 at 09:47 and is filed under Biorefinery, Public Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.